Who was Adam Smith? Adam Smith lived in the 18th century and was a philosopher and economist from Scotland. He is known as the ‘father’ of capitalism because of his book The Wealth of Nations which is known as the most important work ever written on economics. The economic policy of mercantilism had governed Europe for almost three decades until Adam Smith introduced his theories of capitalism. In 1759 Smith published Theory of Moral Sentiments. The book's main ideas that man had a natural inclination to self-interest and self-preservation would later resurface in Wealth of Nations.
What were his central theories? Adam Smith believed that sustainable wealth for a whole country could be achieved by an unregulated free market. In 1776 he published An Inquiry into the Nature and Causes of the Wealth of Nations (commonly shortened to The Wealth of Nations). This book wrote on how competition and self-interest lead to prosperity within an economy, and this was the foundation of capitalism. Adam Smith wrote, “It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest.” This quote explains that the butcher or brewer do not simply give their goods away but put a price on them out of self interest. With the money they make from their goods, they can spend it on other goods and services which makes money for their country whose citizens work to better their finances. The butcher and baker work to provide quality goods that consumers want, so they produce higher profit which in turn benefits both parties. Adam Smith opposed mercantilism because he believed the advantage of trade was opening up new markets for many different goods, and obtaining commodities from another country at a lower price.
One of the guiding principles of capitalism is laissez-faire which means to leave alone or allow to do. The belief here is that economies function best when there is no government interference. Governments should have a hands off approach to businesses. It was believed that a free market, with unregulated exchange of goods and services would produce more goods at lower prices. Adam Smith was the founder of laissez-faire economics and believed government interference was a threat to economic growth. A more efficient balance naturally exists in societies when the individuals are not interfered with in their economic activities.
Another component of Capitalism that Smith recognized was the division of labour. He believed that rather than having one person take many steps to produce a product, companies should have many workers doing individual steps. With workers doing the same simple task repetitively, it improves the workers dexterity and they may discover ways to improve their work. Since workers save time because they do not have to pass from one simple task to another, the goods are produced more efficiently. In order to get high volumes of production, division of labour is crucial to get jobs done. The flaw of the division of labour is that if an individual does a mundane task repetitively, they will get bored of the task and the work force will be dissatisfied. Adam Smith recognized this flaw and suggested the government provide education to workers to resist the destructive effects of factory life.
The invisible hand is a term used to described the unnoticeable force that helps the supply and demand reach equilibrium in a free market economy. The invisible hand leads markets towards positive outputs when self-interested traders compete with each other. The widespread benefits produced in a free market are greater than the benefits of any economy planned by the government.
The invisible hand explained:
Cons of Capitalism Inequality- the misconception that anyone can be rich if they work hard enough is commonly stated in capitalism. This statement is not true because to make larges amounts of money, money must first be taken from somewhere else. This means that without the poor, who get taxed and must consume to survive, the rich could not exist. There is only room for so many people in the upper class, therefore not everyone can be at the top of the wealth. Without proper education, nutrition, and nurturing, some people can never make it to the top no matter how hard they work. This is true for disabled and elderly, who lack competitive skills and need to be taken care of by a caregiver. For those succeeding in capitalism, it only lessens competition and creates a larger gap between the poor and the rich.
Abuse of the System- the freedom granted by free market economies without governments allows for companies to abuse capitalism. When labour demand is low, and worker supply is high, companies can pay workers next to nothing and treat them as if they're disposable. Without governments regulating safe practises, companies can ban unions, pay less than the cost of living, and put workers in unsafe working environments.
Undemocratic- citizens of large capitalistic countries such as the United States and China feel a sense of political powerlessness when it comes to addressing issues such as rising job instability and inequalities of income and wealth. The platform of democracy is to act upon the common good and help societies achieve equity and growth. Whereas the platform of capitalism is to play the market as aggressively as possible, and private companies to gain as much wealth for themselves as possible. Big companies can sway the opinion of the government because the wealth of these companies funds their electoral campaigns. They value wealth over the public opinion which has very little say in the actions of the government.
Advertising- advertising is essentially another form of propaganda, except propaganda is done by governments in dictatorships. Both techniques are forms of brainwashing used to persuade consumers into believing consumption will satisfy their material and emotional needs. Advertising often presents ordinary objects with magical properties to make them more appealing. For the wealthy who can afford luxury, consumerism offers short term ego-gratification. For the majority of society who can not afford quite as much luxury, it leaves them frustrated. Society has been over whelmed with copious amounts of advertising and commodities available that it is absorbed in the ideals and values of consumerism.
How is Capitalism in Canada Today Capitalism today is not done how Adam Smith envisioned it. Government regulation is crucial to protecting consumers and the rights of workers. To protect consumers, there are certain standards goods and services must reach such as the safety of children's toys and the quality of food. Companies must also disclose information, such as food labels, which protect consumers with allergies. To protect workers rights, there are minimum wages and standards the workplace building must meet. Governments also regulate monopolies which restrict output and raise prices, therefore worsening economic efficiency. Without this government intervention, the gap between the rich and poor would be much larger due to worker exploitation and abuse of the system.
IT’S HISTORY. “Adam Smith - The Inventor of Market Economy I THE INDUSTRIAL REVOLUTION” YouTube. February 22, 2015. Accessed November 16, 2017. https://www.youtube.com/watch?v=u7ZvQmJ2GGU.
Adam Smith & Capitalism
Who was Adam Smith?
What were his central theories?
Adam Smith believed that sustainable wealth for a whole country could be achieved by an unregulated free market. In 1776 he published An Inquiry into the Nature and Causes of the Wealth of Nations (commonly shortened to The Wealth of Nations). This book wrote on how competition and self-interest lead to prosperity within an economy, and this was the foundation of capitalism. Adam Smith wrote, “It is not from the benevolence of the butcher, the brewer, or the baker, that we can expect our dinner, but from their regard to their own interest.” This quote explains that the butcher or brewer do not simply give their goods away but put a price on them out of self interest. With the money they make from their goods, they can spend it on other goods and services which makes money for their country whose citizens work to better their finances. The butcher and baker work to provide quality goods that consumers want, so they produce higher profit which in turn benefits both parties. Adam Smith opposed mercantilism because he believed the advantage of trade was opening up new markets for many different goods, and obtaining commodities from another country at a lower price.
One of the guiding principles of capitalism is laissez-faire which means to leave alone or allow to do. The belief here is that economies function best when there is no government interference. Governments should have a hands off approach to businesses. It was believed that a free market, with unregulated exchange of goods and services would produce more goods at lower prices. Adam Smith was the founder of laissez-faire economics and believed government interference was a threat to economic growth. A more efficient balance naturally exists in societies when the individuals are not interfered with in their economic activities.
Another component of Capitalism that Smith recognized was the division of labour. He believed that rather than having one person take many steps to produce a product, companies should have many workers doing individual steps. With workers doing the same simple task repetitively, it improves the workers dexterity and they may discover ways to improve their work. Since workers save time because they do not have to pass from one simple task to another, the goods are produced more efficiently. In order to get high volumes of production, division of labour is crucial to get jobs done. The flaw of the division of labour is that if an individual does a mundane task repetitively, they will get bored of the task and the work force will be dissatisfied. Adam Smith recognized this flaw and suggested the government provide education to workers to resist the destructive effects of factory life.
The invisible hand is a term used to described the unnoticeable force that helps the supply and demand reach equilibrium in a free market economy. The invisible hand leads markets towards positive outputs when self-interested traders compete with each other. The widespread benefits produced in a free market are greater than the benefits of any economy planned by the government.
The invisible hand explained:
Cons of Capitalism
Inequality- the misconception that anyone can be rich if they work hard enough is commonly stated in capitalism. This statement is not true because to make larges amounts of money, money must first be taken from somewhere else. This means that without the poor, who get taxed and must consume to survive, the rich could not exist. There is only room for so many people in the upper class, therefore not everyone can be at the top of the wealth. Without proper education, nutrition, and nurturing, some people can never make it to the top no matter how hard they work. This is true for disabled and elderly, who lack competitive skills and need to be taken care of by a caregiver. For those succeeding in capitalism, it only lessens competition and creates a larger gap between the poor and the rich.
Abuse of the System- the freedom granted by free market economies without governments allows for companies to abuse capitalism. When labour demand is low, and worker supply is high, companies can pay workers next to nothing and treat them as if they're disposable. Without governments regulating safe practises, companies can ban unions, pay less than the cost of living, and put workers in unsafe working environments.
Undemocratic- citizens of large capitalistic countries such as the United States and China feel a sense of political powerlessness when it comes to addressing issues such as rising job instability and inequalities of income and wealth. The platform of democracy is to act upon the common good and help societies achieve equity and growth. Whereas the platform of capitalism is to play the market as aggressively as possible, and private companies to gain as much wealth for themselves as possible. Big companies can sway the opinion of the government because the wealth of these companies funds their electoral campaigns. They value wealth over the public opinion which has very little say in the actions of the government.
Advertising- advertising is essentially another form of propaganda, except propaganda is done by governments in dictatorships. Both techniques are forms of brainwashing used to persuade consumers into believing consumption will satisfy their material and emotional needs. Advertising often presents ordinary objects with magical properties to make them more appealing. For the wealthy who can afford luxury, consumerism offers short term ego-gratification. For the majority of society who can not afford quite as much luxury, it leaves them frustrated. Society has been over whelmed with copious amounts of advertising and commodities available that it is absorbed in the ideals and values of consumerism.
How is Capitalism in Canada Today
Capitalism today is not done how Adam Smith envisioned it. Government regulation is crucial to protecting consumers and the rights of workers. To protect consumers, there are certain standards goods and services must reach such as the safety of children's toys and the quality of food. Companies must also disclose information, such as food labels, which protect consumers with allergies. To protect workers rights, there are minimum wages and standards the workplace building must meet. Governments also regulate monopolies which restrict output and raise prices, therefore worsening economic efficiency. Without this government intervention, the gap between the rich and poor would be much larger due to worker exploitation and abuse of the system.
Bibliography
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IT’S HISTORY. “Adam Smith - The Inventor of Market Economy I THE INDUSTRIAL REVOLUTION” YouTube. February 22, 2015. Accessed November 16, 2017. https://www.youtube.com/watch?v=u7ZvQmJ2GGU.
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Zaykova, Alla. “Advertising- the art of capitalism.” Midnight Media Musings. December 12, 2015. Accessed November 19, 2017. https://midnightmediamusings.wordpress.com/2015/12/12/advertising-the-art-of-capitalism/